Face to face with a profitable future

By Farnoosh Torabi, Special to amNewYork | amSmallBusiness@gmail.com

October 1, 2007

Michael LazerowÂs Buddy Media makes applications for Facebook. (Jefferson Siegel / September 30, 2007)

With rumors circulating about who might gobble up Facebook or whether the popular social networking site will someday go public, many are scratching their heads about what Facebook is actually worth in dollars.

"Whether it's worth $10 billion today or $8 billion or $13 billion, who knows!" says entrepreneur Michael Lazerow.

"The value of Facebook in the future will be significantly higher. It's a fundamentally better site and experience of the web than any other social network that's been launched Good things will happen."

So sure is Lazerow of Facebook's long-term financial success that the 33-year-old has recently started a software development business, Buddy Media, which builds playful applications primarily for Facebook.

The week-old company has launched seven applications so far, including Griddle, Matches and MyProfile. The most recent application is AceBucks, for which Lazerow has managed to raise $1.5 million in venture capital from friends and fellow entrepreneurs.

"It's the largest underground currency on Facebook," says Lazerow, whose previous start-ups have included University Wire and Golf.com. "The whole idea is you use Facebook, we reward you with [virtual] currency and you buy stuff. The vision is it's a loyalty program."

AceBucks currency accumulators have recently won free Apple iPhones and iPods. Later this month AceBucks will let Facebook users buy and sell items to each other using AceBucks currency.

Media Buddy is making money primarily through advertising, says Lazerow, by partnering with companies that want to market though Facebook. "Facebook doesn't pay you. It says here is the application. You're on your own to generate revenue. But when you generate revenue, you keep 100 percent of it."

Users are getting more and more addicted to applications. More than 80 percent of Facebook members have used at least one application built on Facebook Platform, which is the service within Facebook where developers create, distribute and access their applications for free.

In the end, everyone's happy, says Scott Kessler, head of the technology group at Standard and Poor's Equity Research. "Facebook gets innovation at a minimal cost. The users get more variety and functionality from Facebook," says Kessler, "and then the application developers have a whole new revenue source, potentially."

Your turn
Have a great application idea for Facebook? Interested developers can go to Facebook Platform at developers.facebook.com, which has all the tools and tips to start creating an application for the social networking site.

Developers, Lazerow says, are given the freedom to build what they wish.

"To date Facebook has been very hands-off ... as long as the application doesn't violate Facebook's terms of service."